Report: Unused eRate funding spiked in 2002

By Cara Branigan, Associate Editor, eSchool News

March 4th, 2004

Despite declining technology budgets, schools and libraries nationwide have failed to use 42 percent of the eRate discounts promised to them for funding year 2002, according to an analysis conducted by eRate consulting firm Funds for Learning. The federal agency administering the eRate disputes the report on grounds that the data are not all in yet.

Using publicly available data as of Feb. 27, the company report calls untouched $947 million of the funding commitments approved for program year 2002, which officially ended Sept. 30, 2003.

“It’s a bit more than in the past,” said Sara Fitzgerald, vice president of communications at Funds for Learning. “The first year had the best utilization rate.”

The amount of unused funds each year has steadily climbed from $60 million in 1999 to $160 million in 2000 and $200 million in 2001. Fortunately, the $420 million from these three program years has been added to the $2.25 billion available in 2003 because of a new rule issued by the Federal Communications Commission last November.

eRate officials told eSchool News that final numbers for 2002 are not yet available because the Schools and Libraries Division (SLD) of the Universal Service Administrative Co. (USAC), which oversees the eRate program, is still issuing funding commitments for IBM-related appeals.

“If [the Funds for Learning] report suggests the year’s over and 42 percent of the funds have been left on the table, then [the report is] not right,” said George McDonald, vice president of USAC, who is in charge of the SLD. “It’s too early to report on 2002. … There’s still funding commitments coming out for 2002.”

Applicants who are still receiving funding notices for 2002 have until Sept. 30, 2005 to use the funds, McDonald said. Once that time passes, he expects the percentage of unused funds to be “in line with previous years” at 20 to 30 percent.

Still, the rising percentage of unused funds concerns educators.

“Because [funding] could be used right now, it would be nice if schools and libraries could use it,” Fitzgerald said.

Personnel turnover, illness, and even forgetfulness are factors that prohibit applicants from fully using their eRate discounts.

“It’s a full-time job to sit here and follow all these dates and to make sure applicants follow through and use that money,” said Greg Weisiger, Virginia’s state eRate coordinator.

It seems like it would be hard to forget to use the money, Weisiger said, but lag time between deadlines and overlapping program years can be challenging for applicants to handle alongside their regular jobs.

Robert Bocher, a state eRate coordinator for the Wisconsin Department of Public Instruction, agrees. “Part of that is you’re dealing with an application cycle that is so long that the program years overlap,” Bocher said. “You have two to three years of grant cycles overlapping, and you have to keep track.”

He added that sometimes it’s as simple as applicants overestimating the cost of a project, or the price of equipment dropping because of a sale. “A lot of it is overestimating. If you underestimate, you can never go back to the SLD folks and say, ‘I need more,'” Bocher said.

Other times, funding notices come too late for a truly poor school or library to take full advantage.

For example, if an applicant qualifying for a 90-percent discount can’t afford to start a $10,000-a-month internet or telephone service until officials know they will be funded–and then doesn’t receive a funding commitment letter until nine months into the program year–that applicant can take advantage of only three months’ worth of funding, or $27,000, when officials expected to take advantage of $108,000 in funding.

“In a perfect world, every applicant would know by July 1 [the start of a new program year] if they were funded,” Bocher said, explaining how late commitment letters “can play havoc with your budget and implementation plans.”

Schools typically like to do most internal connections installation during the summer months, but notice of funding commitments might come many months later. In addition, vendors need sufficient notice before they can start a project, Bocher said.

“There’s a certain lack of meaningful feedback from the SLD,” he said. “It would be one thing if the SLD said, ‘You’re OK, we’re just still working on [your application],’ but you don’t get that.”

Funds for Learning also cites new eRate rules and the SLD’s increased scrutiny of applications to explain why the amount of unused funds has grown.

“There’s more lag time now that the SLD is doing a more intense review before applicants receive their funding commitments,” Fitzgerald said.

At the Consortium for School Networking conference in Arlington, Va., March 2, USAC’s McDonald announced that the SLD has hired more permanent staff members to conduct applicant reviews and invoicing to process eRate applications faster.

In addition, Funds for Learning has developed a free, web-based tool, called eRate Manager, to help applicants keep track of approved discounts and deadlines to minimize the amount of unused funds. The company also offers an enhanced, fee-based version of the software that enables applicants to store all of their eRate forms in one convenient place.